North Virginia Oceanfront Hotels|"Hotel Prices Could Fall After OFT Investigation Into Comparison Sites"

Source             :   theguardian.com/
Category        :  North Virginia Oceanfront Hotels
By                   :   Patrick Collinson
Posted By      :    Hotels in Virginia Beach North Courtyard

North Virginia Oceanfront Hotels

The probe into the world's two biggest reservation services, Booking.com and Expedia.com, and IHG Group, which controls the Holiday Inn, Crowne Plaza and InterContinental chains, centred on allegations that the major booking sites were insisting on 'rate parity' from hotel chains, which prevented competitive discounting of room rates. Complainants also alleged that the sites prevented rival reservation services from undercutting them. The OFT probed allegations that IHG had made separate agreements with both Booking.com and Expedia to restrict other reservation sites from offering discounts.

In a damning verdict on the two giant reservation sites – Booking.com alone reserves nearly 3m hotel rooms every week – the OFT suggested that real competition was limited. Booking.com and Expedia have now agreed with the OFT to "relax existing restrictions" so that rival agents can provide discounts on the room rates. OFT senior director Ann Pope, who has led a team at the regulator in a two-year probe into the booking sites, said: "The OFT is consulting on whether these commitments offer an immediate and effective means of injecting some meaningful price competition into the online offering of room-only hotel accommodation bookings where, in our provisional view, none may exist." But the threat of multimillion pound fines and penalties against the Expedia and Booking.com has been lifted, with the OFT saying it will close the investigation if the sites accept and abide by the commitments.

The OFT said that it focused on Booking.com, Expedia and IHG in the hope of achieving a swift outcome, but said it was concerned that practices were "potentially widespread" across the industry. Under the proposed new commitments, online rivals to Booking.com and Expedia will be free to use their commission revenue or margin to offer lower prices. The reservation sites obtain commission from hotels for every room they book, which can be as high as 25% of the price paid by the traveller. The expectation now is that as rival online sites accept a lower commission, margins will be slimmed and prices fall.

The OFT investigation was prompted by a formal complaint from a small Brighton-based online travel agent, Skoosh.com, which accepted lower commission rates to undercut other providers. But Dorian Harris, founder of the site, said he was deeply frustrated by the OFT announcement, which he said represented only a partial victory for consumers. "What this announcement means in practice is that we will be able to discount room prices, but we won't be able to tell the public about it. The site will just be able to say there is a discount available"

The new guidelines are likely to result in an explosion of loyalty schemes on booking sites which will offer prices somewhere between current advertised rates and those available on 'top secret' sites where the buyer only finds the name of the hotel after booking. One hotel chain spokesman said: "The new rules will probably mean that you will have to register on a booking site and give evidence that you are a UK resident. When you search for a hotel, you will then be able to access a discount, but only for hotels in the EU. But it will be hotel by hotel; and there will be no guarantee of a discount." Harris said his business started to be squeezed three years ago by big US hotel chains insisting they were removed from his site because his prices were below that of competitors.

"The hotels told me they were being put under huge pressure by the big hotel booking websites to ensure what's called 'rate parity'." Unless he raised his prices, he would be prevented from offering the rooms. He said his firm was also forced off one of the major price comparison sites. "They asked us to leave, which was a major blow for us as it was 70% of our business." Among the evidence that Harris pointed to was job advertising for Booking.com, in which the company sought to hire a "rate parity associate" in which "you are part of a team that is responsible for finding and solving any rate inconsistencies between Booking.com and their competitors". The person was expected to "solve rate parity issues" if they arise. Harris said the OFT announcement confirmed that Booking.com and Expedia were engaged in practices "that they were always, or initially, denying. But this is not a ruling, this is them making a commitment while the investigation is in progress.

In my view the big online agents have given the OFT the runaround. The hotel booking industry is controlled by very few players, with Booking.com now dominant in Europe, while in the US it has bought the comparison site Kayak.The OFT said it was opening a consultation on the commitments, but said that if the booking sites accepted them, it would close the case. At the start of the investigation there was speculation that the major reservation sites could face multimillion pound fines, but the OFT added that if the commitments were adhered to, there would be no financial penalties.

An IHG spokeswoman said: "IHG notes this morning's announcement from the OFT regarding its investigation into the online supply of room only hotel accommodation by online travel agents. The OFT has today commenced a public consultation on a series of commitments designed to bring an end to this investigation without finding of infringement or the imposition of any fine. IHG has worked closely with the OFT to agree these commitments, which are now subject to a consultation period ending 13 September 2013."An Expedia spokeswoman said: "Expedia welcomes these commitments which will enable the OFT to close its investigation without taking any action and to permit Expedia to focus on its long-standing commitment of driving global demand for its partners by providing the best online travel experience."

Source:theguardian.com/business/2013/aug/09/hotel-prices-oft-comparison-booking-expedia